Dispute could disrupt school transportation for thousands in Central Massachusetts -

A labor dispute between one of the country's largest school bus operators and its employees in New York City could disrupt transportation for thousands of Central Massachusetts schoolchildren.

Atlantic Express Transportation Corp. of Staten Island, N.Y., filed for Chapter 11 bankruptcy protection earlier this month, calling its labor costs in New York, its biggest market, unsustainable. Employees received letters last week that said the company may have to shut down operations and fire all its workers on or about Dec. 31.

The effects of the bankruptcy proceedings will ripple beyond New York. Atlantic Express and its subsidiaries employ 5,500 workers nationwide, including about 400 in Massachusetts. In the central part of the state, school districts served by Atlantic Express include Wachusett Regional, Montachusett Regional Vocational Technical, Quabbin Regional, Millbury, Hudson, Spencer-East Brookfield and Tantasqua Regional, according to Atlantic Express. The company runs big yellow buses in some communities, vans in others.

School officials are working to make sure the bus operator's financial problems don't affect local students.

"We've been very pleased with the service from this company, so we're obviously alarmed … learning that there's even the possibility of a disruption," said Kevin M. Lyons, superintendent of the Hudson Public Schools, where Atlantic Express operates 12 large buses and five minivans to transport 1,500 students to and from school.

"We're putting together a contingency plan," he said.

But John P. McCarthy, regional vice president for Atlantic Express's Massachusetts operations, which include the subsidiary Robert L. McCarthy & Son Inc., said school officials should not worry. "I'm telling them that one way or another, there will be buses," he said.

Bankruptcy could spell the end for Atlantic Express and lead to the liquidation of its assets — including its busing contracts, or it could help the company reorganize free of debt obligations. The company went through bankruptcy before, more than a decade ago.

"We're hoping to be reorganized by the end of the month," Mr. McCarthy said. "We've been through this before."

He added that the company may emerge from bankruptcy under a new name. "There's a possibility we could just reform ourselves," he said.

Atlantic Express's bankruptcy filing lists both its assets and its liabilities as between $100 million and $500 million. Its biggest creditor by far is Amalgamated Transit Union Local 1181-1061, the union that represents its drivers in New York. The company owes more than $13 million in wages and benefits to those workers.

"We're at a very dismal financial situation now," said Carolyn Daly, spokeswoman for Atlantic Express. "We emerged from the other bankruptcy, but this one, we've got a lot of speed bumps we've got to get over."

A union spokesman declined to comment other than to say negotiations are ongoing. If the two sides come to a settlement, and if Atlantic Express secures enough financing, the company could continue operating.

Ms. Daly said the company has the highest-paid school bus drivers in New York, earning $25 to $27 an hour, plus benefits, and it's losing market share to firms that employ lower-paid drivers.

"We're competing against companies that are paying $13 to $15 an hour with no benefits," she said.

In Massachusetts, meanwhile, Atlantic Express drivers are paid between $16.50 to about $24 an hour, according to Mr. McCarthy.

If Atlantic Express doesn't survive bankruptcy, he said its Massachusetts drivers — who are mostly nonunion —- will not have trouble finding jobs. "There's a driver shortage," he said. "There will always be work for school bus drivers in Massachusetts."

Wells Fargo extended $12 million to the company last week to help it keep operating, Mr. McCarthy said. He expects more money to come if Atlantic Express settles its union dispute.

Joseph H. Baldiga, a bankruptcy expert at the Worcester law firm Mirick O'Connell, noted that bankruptcy can allow companies to get out of their union contracts. "There are very strict conditions that companies have to meet to be able to do that," he said. Bankruptcy can also be a tool that allows companies to attract financing because it offers lenders certain protections.

She said Richard Bedard, business manager for the Millbury Public Schools and a member of the board of directors for the Massachusetts Association of School Business Officials, is putting together a list of school districts statewide that would be affected and what their needs would be. Mr. Bedard could not be reached for a comment.

Ms. Lajoie said Atlantic Express's subsidiary operates 11 buses that transport students in half of the district's 18 communities. Seventeen buses from three other bus companies, First Student, Merrifield, and Dee, transport students from the remaining nine communities, she said.